Short Sale vs Foreclosure – What’s the Difference in Paducah and Surrounding Areas? Which one do I choose and what works best for my situation?

Whether you’re in the market to buy a home or you’re a homeowner that is facing a financial challenge, it’s important to understand that short sales and foreclosures come with their own unique advantages and challenges.

What Is A Foreclosure In Paducah and Surrounding Areas, KY?

In more simple terms… “A foreclosed home is one in which the owner is unable to make his mortgage loan payments and the bank has repossessed or is in the process of repossessing the home” (source).  We all know that if you stop making your house payments… your lender has the right to foreclose on your property so they can attempt to recoup their money that was lent to you. 

A home is typically foreclosed on when a borrower fails to make mortgage payments. The lending institution assumes ownership and possession of the property, thus evicting the borrower. These properties are then sold at auction or a more traditional means utilizing the service of real estate agents. A foreclosure can damage the credit rating of the borrower, and make it very difficult to obtain a mortgage for many years afterwards. Unfortunately the lending institution can only be lenient so long before they have to mark it as non-payment and foreclose.

Depending on the state that you live in… a foreclosure can work in different ways. Check out this information on foreclosure process information over here at the HUD Government website. It’ll give you some idea as to what the process is in your area.

What Is A Short Sale?

In a short sale, the home is still owned by the borrower.

The definition of a short sale is… “short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens’ full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt” (source: Wikipedia)

Sometimes the lender will accept a lower payoff and forgive the remaining balance. In some cases, a short sale is an option that can be agreed upon by borrowers and lenders. Also in a short sale, the home is sold for less than the outstanding balance of the mortgage, and the unpaid balance (known as the deficiency) may or may not still be owed by the borrower.

This option typically takes some time, as there can be a few different lending institutions that may own the mortgage. All parties who have a stake in the property must agree to the terms of the sale, and a potential deal could fall through if even one lender doesn’t agree.

Short Sale vs Foreclosure – Your Options

While both options can have ramifications, a short sale often has less of an impact on the borrower’s creditworthiness. A foreclosure could impact a borrower’s credit score by 300 or more points, whereas a short sale may only dent the credit score by 100 points.

People who lose their homes through foreclosure might have to wait for 5-7 years before they can buy another house with a regular mortgage. However, in some situations, someone who sells their home for less than they owe on it (a short sale) can buy a new home right away.

As many Americans struggle with an economy that has yet to completely recover from the 2008 crash and the 2020 pandemic some folks are having a hard time making monthly mortgage payments. Choosing between being foreclosed on and initiating a short sale (or a 3rd option…  selling your Paducah and Surrounding Areas house fast  )is an easy choice for a borrower having troubles paying their mortgage on time.

Yet, Sometimes, lenders are willing to work with borrowers to complete a short sale, and therefore avoid the fees and time-consuming process of conducting a foreclosure.

Our suggestion is always this.

  1. Talk with your lender and discuss ways that they can work with you on your loan. We offer this service as well where we can help guide you in the right direction if you run into any of these issues with your lender… just reach out to us on our Contact page and we’ll discuss your situation.
  2. Can try attempting a short sale or look for other programs your lender may have that forgives part of your loan, creates a new / more affordable monthly payment so you can get back on your feet, etc.
  3. If the bank isn’t willing to work with you very much… your best option may be to sell your house. Work with a local real estate house buyer service like Clayton Buys Houses to sell your house fast for an all-cash offer. If you’re interested we can look at your situation and make you a fair offer on your house within 24 hours. Just fill out the form on our website over here >>
  4. Foreclosure. This is the last resort and that is to let the house fall into foreclosure. This is the worst-case possible scenario. It’ll harm your credit and you could still be left with money owed to the bank even after the foreclosure is finished.

By knowing your options, this may help you to be able to dodge a significant impact on your credit score, also allowing you to purchase a new home when your situation improves. A foreclosure on your credit report makes that possibility extremely difficult for 5-7 years, so if you have the opportunity, a short sale can be the better option. These are the differences between a short sale and foreclosure. Which one works for you, and which one is best are questions only you can answer. But we are here willing to help you make these tough decisions.

Do you have a pending foreclosure?  We’d like to make you a reasonable all-cash offer on your house today.

Give us a call anytime at (270) 551-2171 or
fill out the form on this website today! >>

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